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Like it or not, health-care reform seems all but certain after the House passed the Senate's health-reform bill and a package of slight amendments to it last night. Rather than pout or gloat, depending on where you stand, let's focus on what's really important: How can Fools make money from health-care reform?

A slap on the wristEvery aspect of the health-care industry will take a hit from the reform, but drugmakers seemed to have gotten off with nothing more than a mild headache. By getting in early and not opposing reform, they were able to keep their share of the cost to $80 billion.

In return, health care reform should add some 30 million new faces to the ranks of the insured, all of them now better able to afford medications. The biggest benefit will come for drugs that don't have an immediate effect on health, such as Merck's (NYSE: MRK) diabetes drug, Januvia, or cholesterol drugs like Pfizer's (NYSE: PFE) Lipitor or AstraZeneca's Crestor. Unlike lifesaving medicines, which may be one-time charges, it's easy for uninsured patients to justify skipping a prescription when the benefits are years away and the drugs have to be taken daily.

Lowering costsEven if health-care reform isn't everything that proponents hoped for, the movement has certainly shed light on the need to lower costs. Companies in the business of keeping costs down will undoubtedly thrive.

I've previously highlighted pharmacy benefit managers as excellent proponents of cost reduction. Companies like Medco Health Solutions (NYSE: MHS) and Express Scripts lower drug costs by offering mail-order drugs, much like Amazon.com's (Nasdaq: AMZN) lower overhead typically helps it beat companies paying for retail space. The pharmacy benefit managers also reduce drug costs by helping businesses and health insurers set up their plans to encourage patients to use cheaper generic drugs. Medco has even gone so far as to set up its own clinical trial comparing Daiichi Sankyo's and Eli Lilly's Effient to sanofi-aventis' and Bristol-Myers Squibb's (NYSE: BMY) Plavix, which will become generic shortly.

Generic-drug makers like Teva Pharmaceuticals (Nasdaq: TEVA) and Mylan are the other clear winners in the push for lower costs. Many patients will likely switch to generics, especially as branded drugs go off-patent and more clinical trials compare the effectiveness of generic drugs against higher-priced alternatives.

Health-care reform also offers generic-drug makers the benefit of selling copycat versions of biologics, which wasn't available before now. Opening up an untapped market is certainly an advantage, but generic-drug makers will have to wait 12 years after approval before they can start competing. Also, it's unclear how strict the Food and Drug Administration will be in requiring drugmakers to prove that the copycats are similar enough, since biologics are more complex than the small-molecule drugs generic-drug makers currently make.

AdaptingAt the center of health-care reform lies the health insurers like UnitedHealth Group (NYSE: UNH) and Aetna. They didn't get off scot-free, but it could have been worse as a subsidized public plan never made it into the bill.

As I see it, health insurers' ability to thrive at this point will depend upon how well they can adapt to the new rules that will start in 2014. Margins will undoubtedly be compressed as insurers are required to take on patients with preexisting conditions. However, they should be able to compensate with additional volume as the uninsured buy into the system.

Over the next couple of years, investors need to be careful not to gain a false sense of security. Credit card companies increased charges before new credit card regulations kicked in recently, and health insurers are likely to do the same. Profits may increase over the next few years, but 2014 will be the year that really counts.

While the regulation uncertainty is mostly over, conservative investors may want to continue to stay out of the sector until it's clear that the insurers have a firm grasp of how to deal with reform.

Did I miss any clear winners? How do you think the health-care industry will fare post-reform? Let us know in the comment box below.

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I agree with your comment, "Rather than pout or gloat, depending on where you stand, let's focus on what's really important: How can Fools make money from health-care reform?"

The problem is, other then the knee jerk reaction we got today, it may be to soon to tell how the changes will impact stocks.

36 states are actively passing legislation to eliminate one or more aspects of the Bill. 12 State Attorney Generals are in the process of testing the constitutionality of the Bill in the courts.

With each press announcement related to the suits and or new state legislation, health-care insurers, Pharma, and Hospital stocks are likely to rise or fall.

If you're on the right side of the trades, its a pretty good opportunity. The question is, which side is the right side?

Pharma and M&As related to some of the Biotechs should do very well but insurers and health providers are likely to be inflated at this point or a very risky trade until the suits and legislation are settled.

I like your call on generics and companies like Medco and Express Scripts if they aren't already overpriced.

Pharmacies and retail giants may see a small pick-up in prescriptions filled, particularly in rural areas where the uninsured reside. I think CVS, Walgreens, Walmart, and public and private grocery chains with pharmacies all will get a little more traffic as a result of the insurance mandate - after all, if the gov't forces you to pay for coverage, you may as well use it.

As to the more political question of the impact of legislation (not really addressed in the above, but why not give it a shot?) I am skeptical that the uninsured being covered will have a monumental impact on overall health care costs for the nation. Drawing on knowledge from the medical industry through a close relative in medical school, I can see the gargantuan costs of social security piling up as aging boomers live longer than the government anticipates. I am in full support of the Fool's proposal to push out the starting age for benefits as a cost saving measure.

I also hear of the excessive procedures and treatments doctors must pursue to cover their rectums, to put it bluntly. True medical reform will require a significant reduction in the malpractice industry. Here's the catch: when Washington is composed of hundreds of lawyers, who will reform the laws in favor of the doctors? Malpractice insurance costs weigh heavily on doctors, and this ultimately drives higher insurance premiums and more expensive care. If you want to reform health care, start by removing the excessive legal burdens.

Jobs lost by this bill: General practioners, retail employees, and a influx of people who would have gone to other industries but will decide to enter healthcare because its the "hot" field to enter into

I am a physician and to me, the single worst problem I see now is the lack of primary care. All-specialist care does not lower mortality rates and it is more expensive by far. So many diseases are very simple to keep under control (COPD, hypertension, asthma and diabetes for examples) but when out of control, they are monstrosities. A few pennies a day for blood pressure control-or spend thousands a month for nursing home care for stroke victims, take your choice. We have an upside-down health care system, run amok by malpractice effects that have totally changed even medical education--just sent the patient to lab and X-ray no matter what the problem is, and besides, hospitals love it and all these tests are now the so-called "Standard of Care". And for God's sakes, outlaw the drug ads on TV. If we have to, subsidize the drugs people simply cannot ignore, like the asthma inhalers like Advair that are $240 even at Walmart or $40 from a Canadian Pharmacy. And on and on, but enough for now. That alone is enough to save half the current bill. Smoking and obesity are next to conquer.

This occurred to me as I was commenting on a different blog. Americans can get pretty aggressive when government pushes us to the wall so this may not be far-fetched. If it occurs, I wouldn't want to be holding stock in an insurer.

The Health Maintenance Organization Act of 1973 required employers with 25 or more employees to offer federally certified HMO options. Unlike traditional indemnity insurance, an HMO covers only care rendered by those doctors and other professionals who have agreed to treat patients in accordance with the HMO's guidelines and restrictions in exchange for a steady stream of customers. (from Wikipedia)

Just a thought, why can't residents and Physicians in each State band together and create a State Mutual Insurance Company that provides insurance to members substantially at cost by cutting the profit out of the issuer and eliminating government intervention? It seems like this could already be in place in some states?

Mutual Insurance Companies or Associations

501(c)17 Not for profit - providing insurance to members substantially at cost.

A Mutual insurance company is an insurance company which has no shareholders but instead is owned entirely by its policyholders. In a mutual insurance company, any distributed surplus funds are paid entirely to policyholders.

Dr. John Ellis, thank you so much for your outstanding insights, and taking the time to share with us and not ramble on and on. I know I speak on behalf of many other Fool members in sharing my appreciation and gratitude!

The recommended stocks have pretty lofty multiples (Teva, Express Scripts, Medco avg a p/e of about 30). Yes they are winners but their prices (more than?) reflect a VERY rosy outlook. Are there any reasonably priced potential winners?

A likely incentive-based side effect, throughout the economy, that has been little noticed (I've seen a few mentions somewhere): once the new law's all-in, it substantially reduces the catastrophe risks that come with the prospect of leaving "safe" employment (middle-management and professional jobs in large-ish, sound firms) to found a start-up or become a freelance, especially for anybody with preexisting conditions (or with a dependent with such conditions).

This could be moderately disruptive to large, sluggish firms (they may lose some of their best personnel, who were keeping their jobs to avoid losing health coverage -- or may have to offer more stock options &c to retain such personnel), but stimulative to the economy as a whole by encouraging more startups and freelancing.

I don't know how to play this hunch in the stock market, though -- we're talking about effects that will hardly start before 2014-2015, after all. Maybe go long (taking advantage of overall dips that will certainly occur in these next few years) on strong companies which offer services to small business that are typically in-house in large businesses, such as PAYX for payroll and HR services, or HRB for tax and accounting. Any suggestions (including other good firms in such fields)? How would YOU play a hunch that many more startups and freelance operations will come into being 5 years from now?

3) Unnecessary pills swallowed by the consumer because they saw an ad on TV.

I have a family member in med school - these problems are real! Headaches don't warrant CT scans people! Stop suing your doctor when the outcome is hard to bear - the pain of a tragic loss or a disappointing result cannot be assuaged by the legal system. If you have been legitimately harmed due to negligence, fine. Just know that every time a doctor is brought to court, it adds a little more to everyone's health insurance premiums. If you want to raise your health expenses, keep calling up the lawyers on TV.